This post was originally published on this site
President Trump announced a move Thursday night that’s popular with billionaires.
In a series of tweets, President Trump said he has moved his permanent residence to Palm Beach, Fla., and said he had been “treated very badly by the political leaders of both the city and state” of New York. “Few have been treated worse,” he said, through he added New York “will always have a special place in my heart!”
The New York Times first reported the move, citing documents filed in Florida by Trump and his wife, Melania, that said their primary residence was now Trump’s Mar-a-Lago resort. The Times reported the move was primarily for tax purposes. Florida does not have a state income tax or inheritance tax. The Times also said the move will not affect the effort by New York’s attorney general to try to obtain Trump’s federal tax records.
Florida is one of seven states with no state income tax, according to Gibbs Law Office, an estate-planning firm based in the state. “When combined with the warm climate, the friendly tax policy that allows for no income taxes and no Florida estate and inheritance taxes makes Florida an immensely popular retirement destination,” it says.
“Estate and inheritance taxes in Florida work essentially the same way,” the firm adds. “The state government doesn’t charge any ‘federal death tax,’ but qualifying Florida estates are still responsible for estate taxes owed to the federal government. And Florida residents who inherit property from out-of-state may still have to pay inheritance taxes to the other state.”
There are important differences between estate and inheritance taxes. “Where an estate tax is owed by the estate itself, inheritance taxes are levied against the individual portions received by heirs,” it adds. “Estate taxes are paid by the estate executor, or Florida personal representative, often using assets in the estate in Florida or elsewhere; inheritance taxes are owed by individual heirs.”
Trump’s move is not uncommon, especially among ultra-high net worth individuals over the age of 65. Billionaires tend to move out of states with estate taxes, according to a study released Monday by researchers at the University of California, Berkeley and the Federal Reserve Bank of San Francisco. The trend grows stronger as billionaires grow older, they said.
Monday’s study is a peek into the many ways the rich minimize taxes and transfer wealth to the next generation. Twenty-nine states have no estate tax. The federal estate tax of 40% kicks in for estates valued at $11.4 million for an individual and $22.8 million for a married couple. Until 2001, the federal government issued a tax credit to taxpayers that covered state-level estate taxes. Tax cuts during under the Bush administration repealed the credit.
In 2010, one in five billionaires that once lived in an estate-tax state moved to a state that didn’t have the tax. Almost 43% of billionaires 65 and older originally in an estate-tax state moved to a state without the laws. It’s worth the move for many wealthy Americans: A billionaire’s death resulted, on average, in a $165 million influx in state estate revenues.
If Washington state resident Jeff Bezos, CEO and found of Amazon AMZN, -0.19%, passed away, researchers estimated his estate would get hit with a $11.97 billion estate-tax bill. Bezos is the world’s richest man, worth an estimated $110 billion, according to the Bloomberg Billionaires Index.
There are caveats to Florida’s estate tax that help some, but not all, millionaires. The federal government imposes an estate tax that applies to residents of all states. “The federal estate tax only applies if the value of the estate exceeds $11.4 million, and the tax that’s incurred is paid out of the estate/trust rather than by the beneficiaries,” according to DeLoach, Hofstra and Cavonis, a law firm in Seminole, Fla.
“However, if you sell property that you inherited, the funds you receive may be subject to federal income tax if the asset has gone up in value after the decedent’s passing,” it adds. “For example, if you inherit a home or plot of land and choose to sell it instead or keep it for personal use, you may have to pay income tax on the property at the time of sale.”
(Mike Murphy and Andrew Keshner contributed to this story.)
